EU’s Chief in Athens Upbeat Over Greece’s Chances

EU’s Chief in Athens Upbeat Over Greece’s Chances

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Horst Reichenback, the EU's Man in Athens

ATHENS – While even a second bailout hasn’t quelled much skepticism that Greece’s economy can survive, the head of the European Union’s task force to the country said he thinks that the country is making progress on how it monitors its finances, although the banking system still has difficulties, he said. “I am optimistic now as never before,” Horst Reichenbach told Germany’s Passauer Neue Presse newspaper in an article. “The segment in the finance ministry which is responsible for pensions has greatly improved,” he noted. Reichenbach, who heads the special task force to help rebuild the Greek economy, said carrying out sufficient tax audits at Greek companies and the country’s wealthy population remained challenging, as Greece still has not prosecuted any major tax evaders owing the country more than $60 billion despite a recent crackdown in which more than 100 were arrested.

Greece is surviving on a first bailout of $152 billion in loans from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika and awaiting disbursement of a second bailout of $172 billion that comes with a $134 billion write-down in debt but also more of the austerity measures that have created a deep recession with 21 percent unemployment and the closing of more than 111,000 businesses. The second deal will also provide Greek banks with up to 49 billion euros in recapitalization to prevent them from going bust, but Reichenbach said he still wasn’t sure about their solvency. “The financial problems of Greece’s banks pose great difficulties. The banks now need to be re-capitalized so that the economy can prosper,” he said.

The EU task force of about 50 officials, most of whom visit Athens intermittently, advises ministries on measures needed to improve the country’s economic competitiveness and tax collection as well as on reform of the public sector. It estimates that Greece could potentially collect only about $10.6 billion arrears out of the $79.6 billion owed, which is equivalent to about a quarter of the country’s Gross Domestic Product (GDP.) He said that Greece’s rich elite continue to escape scrutiny, which continues to be a real problem. Reichenbach said that Greece’s bureaucracy was a big hurdle to economic growth. “The granting of licenses is a nightmare. It could take years,” he said, adding that solving these problems had “absolute priority.”

Transparency and fiscal predictability has improved significantly, with “the Finance Ministry’s section that deals with pensions performing much better now,” he said.  Other analysts are not so optimistic and said they think that Greece cannot survive without further international aid or a third bailout because revenues are lagging due to the recession caused by the austerity measures, as more businesses are closing every day. Private companies are also beginning to make deep cuts in salaries to keep pace with the reduction in the slashed minimum wage, which the Troika said is necessary to improve Greece’s competitiveness and economy, but which has driven many Greeks close to poverty and despair, although political leaders have trumpeted what they said were their successes.